2020 (1) TMI 119

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....als) has erred in law and on facts in confirming the disallowance of Rs. 99,143/- on account of deemed interest on the loans and advances given to the associate concern. 2.0 The learned Commissioner of Income Tax (Appeals) has erred in law and on facts in confirming the disallowance of Rs. 31,622/- on account of unpaid service tax of earlier years by erroneously invoking the provisions of section 43B of the I T Act, 1961. 3.0 The learned Commissioner of Income Tax (Appeals) has erred in law and on facts has dismissed the ground relating to initiation of penalty proceedings under section 271(l)(c) of the Income Tax Act, 1961 for the alleged concealment and/or furnishing of inaccurate particulars of income. 4.0 The ....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....associate concerns for business purposes and no part of the interest bearing loans taken from the bank have been diverted to advance interest free loans to the sister concerns. The company had sufficient funds at its disposal to advance such loans. Further such loans have been given in the ordinary course of the business and sister concerns to whom the loan has been advanced are also tax paying assessees which have not shown any expenditure on account of interest. It is submitted that section 36(i)(iii) of the Act provides for deduction of interest on monies borrowed for computing business income. The conditions that need to be satisfied for allowance of deduction under section 3During the course of scrutiny, it was observed that service ta....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....erns to the tune of Rs. 1,33,33,689/- as on 31st March, 2007 but not charged any interest. Therefore, the assessing officer has charged notional interest @ 12% of Rs. 16,00,763 on the balance of outstanding loan on the ground that interest bearing funds were advanced to its sister concerns. 7. Aggrieved assessee preferred appeal before the ld. CIT(A). The ld. CIT(A) has sustained the addition to the extent of Rs. 12,04,742/- after excluding the interest charged of Rs. 1,56,262 on the customer balance representing sale made earlier year of Rs. 13,02,182/-.The ld. CIT(A) has sustained the part of the addition on the ground that assessee had given interest bearing funds to its sister concerns on which it was paying interest to the ban....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

.... bad debt of the assessee of those interest incomes has been allowed by the ld. CIT(A) and not disputed by the revenue in further appeal. In assessment year and subsequent years, assessee has stopped charging interest and accounting it in the income on accrual basis. This is not a sound accounting policy as at outset it should have been recognized the same as income on accrual basis and thereafter would have given the deduction of claim of bad debt which the assessee failed in these years. Further, when we visualize this situation as a whole traveling from three assessment years, then, it is observed that interest income was recognized on accrual basis and thereafter claimed as a bad debt of its non-realization, this has been allowed by ld.....